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Medical Services Agreement v. Sublease

June 12, 2012

Question:

Hi Jennifer,

When would you consider doing a medical services agreement versus a sublease?

Thanks, Dr. R

Answer:

Good question and one clients typically can't answer themselves. The distinction between a medical services agreement and a sublease is just the tip of the iceberg when categorizing potential agreements your practice may have in place or may need in place. And, a medical services agreement and a sublease are very different, and each in totally separate categories with other agreements. A medical services agreement should read like it sounds, as an agreement where you are contracting to provide or to have someone else provide medical services. This arrangement may be on a W-2 or 1099 basis. The purpose of the agreement is to set forth the terms of how such services will be rendered. Other agreements in the same category include employment agreements and independent contractor agreements, as well as potential consulting agreements or medical director agreements. Under any of these "service agreements" you would be contracting for an individual to perform services for patients of the practice and the practice would perform billing in its name and pay compensation to the provider rendering services.

A sublease is a very different concept than a services agreement. A sublease is a contract conveying a property interest that includes the right of possession to the subtenant. A sublease is often used incorrectly as a license agreement or confused with the concept of a license agreement - a license is a contractual right to do something on a property (for instance, operate a medical practice in a set space, with the assistance of personnel and equipment). Depending on whether you are looking to contract for the right to use solely space, or whether additional services will be included will determine whether a lease or license is appropriate. In either case, the subtenant or sublessee would be operating their own practice at your location, responsible for their own billing and independent medical judgment (of course, this is dependent upon your contract being worded properly).

It is so important for a practice to take the time (and spend the money) to appropriately capture an arrangement at its inception, and there are a number of reasons why, however I will not provide an exhaustive list. Instead I'll cite 2 reasons - first, because capturing the arrangement at the inception will ensure you have defined duties, obligations and liabilities before the relationship gets started (or soured!); and second, with the number of regulators out there, documenting payment terms for many arrangements is an absolute must to substantiate same and document no impropriety exists in the relationship.

 

Copyright © 2012 by Kirschenbaum & Kirschenbaum PC.

All Rights Reserved. This email is provided for news and information purposes only and does not constitute legal advice or an invitation to an attorney-client relationship. While every effort has been made to ensure the accuracy of the information contained herein, Kirschenbaum & Kirschenbaum PC does not guarantee such accuracy and cannot be held liable for any errors in, any reliance upon this, or losses caused by the information. Under New York's Code of Professional Responsibility, this material may constitute attorney advertising. Prior results do not guarantee a similar outcome.

 


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